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Spending Cuts and Politics of Bureaucracy

August 1, 2011

by Chidem Kurdas

I just read The Politics of Bureaucracy by Gordon Tullock, one of the best books written on the behavior of bureaucrats. Although originally published in 1965, it remains very much relevant today, especially as the debt deal currently in Congress could bring spending caps on programs administered by numerous bureaucracies. These entities implement policy changes, yet efforts to rein in government spending or impose new regulation typically pay little or no attention to their behavior.

Professor Tullock derives his insights from the basic observation that when embedded in an administrative hierarchy that is supposed to serve some – typically vague – public interest, people remain individuals; they still have their own preferences and interests. This is nicely expressed in the foreword by James Buchanan, who paraphrases Adam Smith’s well-known dictum about the butcher, the brewer or the baker. I will further paraphrase his take on Smith: “It is not from the benevolence of the bureaucrats that we expect our budget savings and better rules, but from their regard to their own interest.”

From this follows much insight, including a clear definition of what an efficient bureaucracy would be. A hierarchy is efficient if the bureaucrats are led by self interest to do the things they ought to do in order to serve the mandate that comes from their political masters—ultimately from the citizenry, at least in theory in a country like theUS.

Efficient incentives will be such as to lead careerists to behave as if they were idealists committed to the public good. For example, suppose a bureaucracy is given the goal of saving $10 billion over the next two years while getting the most benefit for the public from the reduced budget. If the organization is truly efficient, in order to further their careers its members will find ways to save money intelligently, with minimal harm to the public.

The flip side of that coin is the inefficient organization where an idealist who wanted to save money would find that this harms his or her career and would be hindered from furthering the public goal. Those who pursue other ends are promoted and come to run the bureaucracy. Tullock discusses in detail the various reasons large hierarchies become inefficient—-we need to pay a lot more attention to his warnings.

These apply to private corporate bureaucracies as well as public bureaucracies, but there is a major difference in that private corporations operate in markets where they face competition. Competing producers, buyers, sellers and employers squeeze dysfunctional firms.

Public bureaucracies usually face little or no such discipline— they are monopolies in the particular activities they were assigned to. There are exceptions, like the US Post Office amid competition from private carriers. But such situations are rare and even in the face of rivals public bureaucracies can survive for a long time despite being inefficient.

Inefficient hierarchies can be forced to stay within their budget, but they will do so in ways that protect their own interests while imposing additional burdens on everyone else.

The book is available as part of the Selected Works of Gordon Tullock, volume 6, titled Bureaucracy, edited by Professor Charles Rowley of George Mason University. Sharing the same volume is another Tullock classic, on economic hierarchies.

Messrs. Buchanan and Tullock pioneered the application of economic reasoning to politics. Together and separately, they made seminal contributions. Buchanan was awarded the Nobel prize but Tullock was not. His highly readable, lucid and witty writing style, of which this volume is but one example, may be a reason. He writes so well, in places it seems like he’s just having a conversation with the reader.

That his arguments are presented with a light touch far removed from the usual academic or technocratic jargon may have led to his not being given his due by the economics profession at large. In fact the arguments rest on a sturdy analytical framework that should rank among the very top original contributions to social thought in the 20th century or for that matter any era.